Are The Building Blocks Of Metaverse Already In The Regulator’s Eyeline?

Romain Svertwaeger, Associate Partner, Assurance et Florent Charlier, Senior Manager, Assurance (Photo © EY Luxembourg)

The Web is entering a new transformational phase that will likely disrupt business models and online interactions. NFT’s and Crypto-asset technologies are paving the way for Web3 and Metaverse while harmonized regulation constitutes a critical stake for its ecosystem. 

The Web Journey

At its advent in the ‘90s, the Web1, also referred to as the read-only Web, offered digital content on static web pages. The emergence of Web2 in the early 2000s has drastically changed the one-sided consumption scheme. Web applications born under the Web2 have enabled the users to produce, share and distribute interactive contents underpinned by cloud and mobile infrastructures. Users’ interactions generated massive amounts of valuable data which has led to several Web2-centric companies becoming today’s world’s largest firms in market cap. The recent expansion and adoption of tokenization and more specifically the non-fungible token (or NFTs) hint at web users’ willingness to retrieve ownership over their digital content and find alternatives to the big players’ monopoly. Web3, or Read-Write-Own web, is perceived as the paradigm shift where the fundamentals would lie in the decentralization, the openness, and the interoperability enabled by blockchain technologies.

Will the Metaverse fit in the Web3 paradigm?

Over the past few months, the market has seen growing excitement but also questioning over the concept of Metaverse, mostly resulting from Facebook’s rebranding to Meta, but also the penetration of several blockchain-based projects such as Decentraland, the Sandbox or Opensea.

Although there is no consensus over the definition of metaverse, some key features standout and let us divine the emergence of virtual, immersive, connected, and persistent universe accessed through haptic and AR/VR hardware. Its applications would include games, asset marketplace and financial services. According to Bloomberg, the global Metaverse revenues could approach $800 billion in 2024[1].  

Web3 and Metaverse are not the same thing and will not constitute competing versions of the next internet. While Metaverse will mainly define how people experience tomorrow’s internet, Web3 will rather tell who owns it.

Will big techs just strive to create a more immersive version of Web2 and keep their sovereignty? Or, alternatively, will we see Decentralized Autonomous Organizations (DAOs) and their decentralized governance emerge and become the next giant shaping such a virtual universe? A combination of both shall also not be excluded. It remains too early to assess whether Metaverse will fully endorse the paradigm of Web3. The extent to which technology players will mold the Metaverse as a distributed interoperable ecosystem will be an indicator.

But both assemble around common building blocks, namely the NFTs an blockchain technologies, which currently stand in the regulator’s eyeline. The ability to achieve a regulatory harmonization and convergence while allowing sufficient room for technological development and competition will constitute a major stake for the future of blockchain but also Web3 and Metaverse.

Authors: Romain Swertvaeger, Associate Partner, Assurance et Florent Charlier, Senior Manager, Assurance.

[1] Source : « Metaverse may be $800 billion market, next tech platform » Bloomberg Intelligence, 1 December 2021

This article was first published in the Silicon Luxembourg magazine. Read the full digital version of the magazine on our website, here. You can also choose to receive a hard copy at the office or at home. Subscribe now.

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